Beware the China bull – there’s still a long march ahead

It has long been said that when the United States sneezes, the rest of the world catches a cold. That may still be true, but it is the health of its nearest rival that needs monitoring.

For the new mantra could soon be: when China gets a headache, the rest of the world suffers a migraine. The global economy has become increasingly dependent on the China growth story.

As Western countries begin the march from recession, China is on a high after economic growth of 8.7pc last year. This exceeded the government&apos;s target by 0.7 of a percentage point and brought China to the verge of surpassing Japan as the world&apos;s second-largest economy.

As things stand, China will catch the US in terms of purchasing-power parity in five to eight years. In nominal dollars, it will match the US in 20.

Chinese trade has shown a strong V-shaped recovery, narrowing from a 25pc contraction in the first half of last year to a 14pc decline for the whole year. China&apos;s exports rose 21pc in January from the previous year, imports grew 85pc, and auto sales and production leapt 143pc and 124pc respectively.

Even though China has been the biggest beneficiary of the economic rebound, it has led the recoveries of other countries. Its total gross domestic product (GDP) may lag that of the US, but its contribution to world GDP growth far exceeds its closest competitor.

As we enter an era in which the relationship between China and the United States promises to govern the global economy, we cannot afford China&apos;s progress to be derailed.

Investors are building exposure to China within portfolios. It is undeniably sensible to rebalance a portfolio to reflect the changing global order – in the long term, China&apos;s ascension to superpower status is assured.